Gold edges lower ahead of CPI
Gold prices have traded relatively quietly during the week ahead of US CPI data.
Whilst risk-off sentiment and safe-haven flows have supported the precious metal, a stronger USD and rising treasury yields kept the gold price pressurised.
The 50-basis point rate hike from the RBA earlier in the week and the more hawkish position from the ECB highlight the more aggressive stance that central banks are adopting in the face of high inflation.
Attention is now firmly on US CPI data. CPI fell from 8.5% in March to 8.3% in April and is expected to stay steady at 8.3%. Core CPI fell from 6.6% in March to 6.2% in April and is expected to slip to 5.9%. Energy prices are still likely to show a significant contribution to headline CPI.
Hotter than forecast inflation could fuel expectations of a more aggressive Fed, lifting the USD and dragging gold lower.
Cooler than forecast inflation could take the pressure off the Federal Reserve and lift gold.
Where next for Gold?
Gold has been consolidating below its rising trendline resistance, supported by the 200 sma. The RSI has just tipped below 50, suggesting that there could be more downside to come.
Sellers need to break below the 200 sma and 1829 the June low towards 1807 the May 19 low.
On the flip side, should the 200 sma hold, buyers will look for a rise over 1857 the weekly high, to attack 1876 the rising trendline support, and November high. A move beyond here exposes the 50 sms at 1886.
DAX extends declines after ECB
The DAX fell steeply in the previous session and is falling again today as inflation fears and aggressive central bank bets prompt risk aversion.
The ECB committed to a 25 basis point rate hike in July and possibly a 50 basis point rate hike in September. The ECB also cut the GDP outlook to 2.8% and raised the inflation forecasts to 6.8%.
In addition to a more hawkish ECB, concerns over fragmentation are also unnerving investors.
Where next for the DAX?
After running into resistance at 14700, the DAX rebounded lower. The break below the 100 and 50 sma and the bearish RSI point the further losses for the index.
Sellers will look towards support at 13800, the multi-month falling trendline support, ahead of 13660, the May 19 low. A break below here could bring 13280 into target, with a move below here creating a lower low.
On the flip side, a move over the 50 sma could pave the way to the 100 sna at 14360 and back to 14700. A move above here would create a higher high.
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